Spirit, Boeing Reach New Commercial Airplane Accord

 - December 27, 2018, 3:19 PM
A railway line outside Wichita, Kansas, carries Boeing 737 fuselages built by Spirit AeroSystems to Renton, Washington, for final assembly.

Spirit AeroSystems and its largest customer, Boeing, have reached a new, long-term agreement on a broad range of commercial airplane programs, the Wichita-based aerostructures supplier announced Thursday. Spirit did not disclose financial terms of the memorandum of agreement but said it sets pricing terms for the Boeing Next Generation 737, 737 Max, 767, 777 freighter, 787 Dreamliner, and the 777-9, the first variant of Boeing’s new 777X.

Specifically, the agreement addresses investments for tooling and capital for certain 737 rate increases, and pricing that’s based on production rates that are above and below the current rate of 52 737s a month. Also, the agreement provides for the release of liability and claims from both companies over 737 “disruption activity.” Earlier this year, Spirit fell behind in 737 fuselage production but has since recovered.

“This agreement further strengthens the long-standing partnership between Boeing and Spirit as it removes uncertainty well into the next decade,” said Spirit president and CEO Tom Gentile. The 737 program accounted for 49 percent of Spirit’s $7 billion in net 2017 revenue. 

Spirit said the agreement, which is expected to be finalized January 31, also calls for Boeing’s consent to Spirit’s acquisition of the parent company of Belgian supplier Asco Industries, which was announced in May 2018. In October 2018, Spirit said closing on the Asco deal was postponed after a European Commission review of it turned up “issues that it requires to be addressed,” Spirit said.

Lastly, the agreement includes joint cost reduction programs for Boeing’s new 777X and the 787. “With the new agreement, we expect price to exceed cost eventually on the 787 program,” Gentile said.

A Spirit spokeswoman said the new agreement supplements the company’s September 2017 pricing agreement with Boeing. That agreement, which took several years to reach, resolved issues through 2022 related to production on Boeing aircraft programs including the Max and 787. She said the new agreement addresses different items and extends the pricing period on some airplane programs.